Federal Construction Contracting Lawyer & Attorney : Payne Hackenbracht & Sullivan : Construction Law, Dredging and Claims

In a case captioned as Ace Constructors, Inc. v. United States concerning a contract with the Corps of Engineers for the construction of a structure at Biggs Army Airfield, the Federal Circuit upheld a Court of Federal Claims ruling awarding an equitable adjustment to ACE Constructors (“ACE”) and the return of liquidated delay damages.  The Court had ruled that, due to unforeseen conditions and defective specifications that were incorporated into the contract, ACE was entitled to additional relief beyond that which was provided by the contracting officer.  In particular, the Court awarded ACE its additional costs for: 1) being required to use a more expensive concrete testing methodology than was required by the contract; 2) being required to use a more expensive method of concrete paving than was required by the contract; and, 3) a Type I differing site condition that required 129,000 additional cubic yards of fill dirt.

On appeal, the government argued that the award for concrete testing was erroneous because: 1) ACE had failed to exhaust its administrative remedies and, therefore, the Court did not have jurisdiction over the claim; 2) the contract required the more expensive testing method; and 3) ACE did not demonstrate that its bid was based on the less expensive method of testing.  The Federal Circuit held that the Court of Federal claims had jurisdiction because the claim presented to the contracting officer and the claim before the Court did not differ significantly.  The Circuit Court also upheld the lower court’s ruling that the specifications were defective and that ACE reasonably concluded that the more expensive testing was not required by the contract (a fact which the government had acknowledged during the course of performance of the contract).  Finally, the Circuit Court upheld the lower court’s ruling that ACE reasonably based its bid on the less expensive method of testing. Regarding the method of concrete paving required by the contract, the government again argued that the Court lacked jurisdiction to entertain the claim and additionally argued that ACE unreasonably relied on the defective contract specification when it calculated its bid based on the less expensive method of paving.  The Federal Circuit again found that the Court of Federal Claims had jurisdiction over the claim and upheld the Court’s ruling that when the government provides a contractor with defective specifications, it is deemed to have breached the implied warranty that satisfactory contract performance will result from adherence to the specifications. ACE’s reliance on the specifications was reasonable.

On the Type I differing site condition claim, the government contested the quantum on appeal, arguing that ACE should have foreseen the error in the specifications and that the government should be credited for the (unrealized) savings that ACE anticipated from not having to bring in additional fill dirt when it bid the project.  The Federal Circuit upheld the Court’s determination that ACE, and the expert consultant it used in the bidding process, reasonably concluded from the plans provided by the government that significant amounts of additional fill dirt would not be needed. As for the government’s second argument concerning a credit for unrealized savings, the Federal Circuit ruled that “[t]his argument was not presented to the contracting officer, was not discussed in the decision of the [CoFC], and is devoid of merit.”

This synopsis of the case was furnished by Case Digest, a publication of the Federal Circuit Bar association.

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A recent decision by the Court of Federal Claims, AAB Joint Venture v. United States, (January 26, 2007), illustrates some of the subtleties of the Contract Disputes Act of 1978.  The contractor was awarded a design-build contract for a military storage complex.  The government provided a geotechnical report in the solicitation for the contractor’s use in preparing its proposal and subsequent design.  The contractor discovered, during construction, that the actual subsurface conditions differed materially from those represented in the government’s geotechnical report. Specifically, the report stated that the material was “limy dolomite rock, mostly massive and hard.”  However, the contractor discovered that there was less hard rock and more expansive, clayey material.  The latter material adversely affected the contractor’s plan to use shorter piles and spread footings for the building foundations.

The contractor submitted a certified claim to the contracting officer for the impact of the differing site conditions on the length of piles required for the perimeter of the structures, contending that the softer material required longer pile lengths.  When the government failed to issue a contracting officer’s decision, the contractor appealed to the Court of Federal Claims on the basis of a deemed denial of its claim. 

In its complaint, the contractor included a claim for the removal of unsuitable subsurface material in the footprint of the structures and requested a $412,000 equitable adjustment. The government objected to that part of the claim, arguing that the claim had not been presented to the contracting officer and, consequently, had not been certified. The government sought dismissal of the unsuitable material claim because the Court lacks jurisdiction to hear a claim that has not been presented to the contracting officer and certified.

Although the contractor argued that the unsuitable material claim stemmed from the same operative facts as the pile claim, namely the defective geotechnical report, the Court determined otherwise. The court noted that the certified pile length claim did not include any mention of the replacement of unsuitable material under the structures nor any estimate of the amount of the associated costs. In its decision dismissing the unsuitable material claim, the Court stated that “the contractor must submit in writing to the contracting officer a clear and unequivocal statement that gives the contracting officer adequate notice of the basis and amount of the claim,” noting that the purpose of a certified claim is to “push contractors to be precise in the claim that they submit to the contracting officer.”

However, all is not lost. The contractor still has the opportunity to present a certified claim to the contracting officer for the unsuitable material under the structures and to appeal any adverse decision.

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A recently reported decision by the Armed Services Board of Contract Appeals underscores the necessity for bidders to review pre-bid data listed in the solicitation. In Mass Construction Group, Inc., ASBCA No. 55440, the contractor pursued a claim for a differing site condition, alleging that it had encountered a Type II condition, namely “unanticipated” groundwater flooding into its footing excavations.

The ASBCA, in denying the contractor’s appeal, made the following findings of fact:

1)  The solicitation advised bidders that subsurface data was available for review at a specified location. (the government’s contracting office).

2)  The subsurface data disclosed a groundwater table that existed between three and one half and six feet of the surface elevation.

3) The contractor did not review any of the subsurface data before submitting its bid and did not attend the pre-bid site visit.

4) The site conditions encountered by the contractor were quite similar to those disclosed in the subsurface drilling logs that the contractor neglected to review.

The ASBCA, therefore, found that the contractor had not established that it had encountered unanticipated site conditions. Significantly, the Board stated that the failure to review the subsurface data at the scheduled pre-bid site visit,” put Mass at risk of any unexpected subsurface conditions which it encountered.” 

The message in this decision is unmistakable: If the government’s solicitation advises potential bidders of subsurface data that is available for inspection, bidders must review this data or be willing to risk the potentially serious consequences of failing to do so.

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Although a contractor encountered subsurface conditions in a dredging project that it may not have anticipated, it was unable to prove that the hard material was a differing site condition.   The contractor’s claim was that it had encountered a Type I differing site condition. The Armed Services Board of Contract Appeals denied the claim, stating that the contractor had not proven that the actual conditions differed materially from those indicated in the solicitation. The ASBCA reiterated the four elements of proof that a contractor must meet in order to prevail on a Type I differing site conditions claim, as follows:

1) The conditions in the contract must have differed materially from those encountered.

2) The actual conditions must not have been reasonably foreseeable based upon all of the information available to the contractor at bid time.

3) The contractor must have reasonably relied upon its interpretation of the contract and the contract related documents. (In this case there were additional boring logs referenced in the solicitation that were available upon request).

4) The contractor must have been damaged by the actual, materially different, conditions.

In denying the contractor’s claim for a differing site condition, the ASBCA held that “a contractor has a duty to review information that is made available for inspection.” The Board of Contract Appeals determined that had the bidder reviewed the referenced boring logs in conjunction with those appended to the solicitation, the site conditions encountered would have been reasonably foreseeable. The ASBCA found that the actual conditions, including rock, cemented sand, and other hard materials were reasonably foreseeable based upon the borings in the solicitation and the additional borings referenced in the solicitation as being available upon request.  See Appeal of Bean Stuyvesant L.L.C.

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